Engineer and manufacturer of components for transportation, appliance, medical, and consumer markets Unique Fabricating, Inc.’s (UFAB) shares have gained 19.7% over the past month. However, it is currently trading 56% below its all-time high of $7.51, which it hit on January 26 and 27. While UFAB reported improved top-line and bottom-line results in the second quarter, the company faces ongoing labor shortages and supply chain challenges.
However, UFAB is well-positioned to continue gaining in the near term relying on its solid fundamentals. Moreover, Doug Cain, UFAB’s President and CEO, said, “Industry forecasts continue to point to near-term recovery, and it appears there is meaningful pent-up demand.” So, UFAB’s near-term prospects look bright.
Here’s what could influence UFAB’s performance in the upcoming months:
Raises Capital to Strengthen Balance Sheet
On September 21, 2021, UFAB announced that it had raised approximately $4.4 million through a private offering and sale of public equity of 1,954,000 shares of common stock. The company’s CEO, Doug Cain, said, “This transaction strengthens our balance sheet and reduces our debt levels, as we continue to navigate the industry-wide supply chain and pandemic-related challenges impacting our customers and our company.”
Improving Financials
UFAB’s revenues surged 106.9% year-over-year to $30.90 billion for the fiscal second quarter ended June 30, 2021. In addition, its gross profit grew 150.7% year-over-year to $4.62 billion. The company’s net loss came in at $2.51 billion, representing a 41.9% year-over-year decrease. Also, its loss per share came in at $0.26, down 40.9% year-over-year.
Reasonable Valuation
In terms of forward P/S, UFAB’s 0.29x is 76.3% lower than the industry average of 1.24x. Likewise, its forward EV/S of 0.72x is 51.4% lower than the industry average of 1.47x.
Favorable Analyst Estimates
Analysts expect UFAB’s revenue to increase 13.1% for the quarter ending December 31, 2021, and 20.6% this year. The company’s EPS is expected to grow 208.3% for the quarter ending December 31, 2021, and 1,733.3% next year. Moreover, its EPS is expected to grow at a rate of 21% per annum over the next five years.
Bottom Line
Despite supply chain issues, UFAB reported improved second-quarter results. The company expects to recognize a one-time $6.10 million gain related to debt forgiveness in the third quarter.
So, considering its reasonable valuation and favorable growth estimates, it could be wise to scoop up its shares now. The only Wall Street analyst rating the stock has rated it ‘Buy.’ The price target of $5.50 indicates a potential upside of 52%.
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UFAB shares were trading at $3.29 per share on Thursday afternoon, down $0.33 (-9.12%). Year-to-date, UFAB has declined -40.17%, versus a 16.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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